Italy allocates 5.2B euros for troubled banks

ROME—The Italian government on Sunday made 5.2 billion euros ($5.8 billion) of resources immediately available to keep operative two banks that the European Central Bank has deemed “failing or about to fail,” sending them into insolvency procedures.

Premier Paolo Gentiloni defended the swift action by the government as vital for ensuring Italy’s slow economic recovery isn’t derailed by a “disorderly” failure of Veneto Banca and Banca Popolare di Vicenza.

The two banks are based in the northeast Veneto region, one of Italy’s most economically productive. They serve many of the small and medium-sized businesses that are the backbone of the nation’s economy.

Economy Minister Pier Carlo Padoan assured Italians that on Monday “there will be normal operations at the teller windows” when the two banks reopen their doors after the weekend.

The European Central Bank on Friday night pulled the plug on the two troubled banks, which have struggled with high levels of outstanding loans.

The resources approved by the government will facilitate, as widely anticipated, Italian bank Intesa Sanpaolo’s taking on the “good” assets of the two banks.

Banks that can’t issue loans hamper Italy’s businesses from bouncing back, and also create vulnerability for the eurozone economy.